China Steelmakers Buy Less Australian Iron Ore, Baltic CEO Says

May 22, 2008

May 22 (Bloomberg) — China’s steelmakers are shunning imports of Australian iron ore as negotiations on the raw material’s price have dragged on to almost seven weeks more than usual, the Baltic Exchange Ltd. said.

Steelmakers are instead hauling more of the steelmaking ingredient from Brazil, increasing average voyage lengths and boosting commodity-shipping rates to records, Jeremy Penn, the Baltic Exchange’s chief executive officer, said in an interview on Bloomberg Television today. It costs $45.29 a metric ton to ship iron ore to China from Australia compared with $107.58 from Brazil, according to yesterday’s prices from the exchange.

The “Chinese are simply not buying as much iron ore right now from Australia,” Penn said in London.

Melbourne-based BHP Billiton Ltd., and Rio Tinto Group are locked in negotiations with Chinese steelmakers over the 2008 contract price for iron ore. They want a bigger increase than the 65 percent that Brazil’s Cia Vale do Rio Doce achieved to reflect the freight savings that can be made by shipping ore from Australia rather than Brazil.

Contract prices are agreed once a year and are normally completed by April 1.